Commercial Mortgages

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Commercial Mortgages

Nik Mair shares his expertise on commercial mortgages.

What is a Commercial Mortgage and how do they work?

A Commercial Mortgage is pretty much the same as mortgages on residential properties, however, it’s there for a different purpose. Obviously residential mortgages are where you reside in the property, whereas a Commercial Mortgage will be a retail shop for example, and business premises purely used for commercial use.

Are Commercial Mortgage rates higher than Residential Mortgage rates?

Yes, especially post-pandemic. Commercial Mortgage rates are typically higher than residential, not a huge amount higher, but it depends on the type of commercial premises as well, because different lenders have a different appetite for different commercial use. That will affect which lender and you will usually need to go to a specialist lender for a particular commercial use.

What are the criteria for a Commercial Mortgage?

Typically you’re looking at a maximum Loan to Value (LTV) of around 65%. Some lenders can stretch to 70%, or maybe even 75%, depending on the tenant and how many years are remaining on the lease. There are a few factors to consider when it comes to Commercial Mortgage terms.

How much can I borrow and how much deposit do I need for a Commercial Mortgage?

If it’s 70% LTV then you need to put down a 30% deposit. It also depends on the rent that’s currently being paid, as well as the type of use for the commercial premises.

What costs are involved with a Commercial Mortgage and do you pay Stamp Duty on a commercial property?

Yes, you do pay Stamp Duty. However, it is a different rate compared to the residential stamp duty rate. Commercial Stamp Duty rates are available online.

Other costs involved will be valuation fees, legal fees, and lender arrangement fees.

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Is a Commercial Mortgage tax-deductible?

It can be, but you would always need to speak to a qualified accountant to seek tax advice, because I’m not qualified to provide it. If anyone’s in doubt then they should definitely speak to an accountant.

How long is a typical Commercial Mortgage?

It can be from ten to fifteen years, there are a few variables. It depends on the tenant for example Tesco would perhaps be very different from a bet Fred or William Hill-type of commercial use. It will also depend on how many years you have remaining on the lease and if there’s a break clause as well. But this is where we are able to guide individuals accordingly.

How do I apply for a Commercial Mortgage?

If anybody is in need of a Commercial Mortgage they should definitely get in touch with ourselves. We are a whole of market brokers directly authorised by the Financial Conduct Authority and we work with a whole panel of commercial lenders, not just your high street lenders. Feel free to get in touch and let’s see how we can help.

Commercial mortgages are a specialist area, and it’s important to have a bit more of an in-depth conversation with a commercial broker. Lenders will want to look at the accounts history of the current business but we can certainly advise on this when you’re ready to discuss anything further.

Can I Remortgage my commercial property?

Absolutely. You can Remortgage if you need a cash injection to the business, or if you’re looking to acquire another investment property. Whatever the reason, there’s certainly a way to refinance your current commercial premises to raise more funds.

Your property may be repossessed if you do not keep up with your mortgage repayments.

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